Selecting tax saving investments

You should think about the following criteria, before selecting your tax saving investments for the year:

Liquidity: How quickly will you need the money? Will you need to access the money within the next year or two years or over what duration ? None of the above instruments let you withdraw your money quickly, in fact there is a minimum three year lock in for all tax saving investments.

Risk and Return: How much risk do you want to take. There is a trade off between the two, some instruments are very low risk, but as a result they give low returns which are capped.

Inflation protection: The instruments that give you a low return typically are the worst type of investments regarding inflation. This is important because many of the instruments give you a fixed rate of interest, and lock in your money for a long period. This is not a good protection against inflation.

Tax Exemption: All tax saving investments under Section 80C are alike in one respect that they are tax exempt when they are invested. But they differ with respect to the tax on the income you earn from such an investment as well as the tax on the maturity of the investment

List of qualifying instruments under S. 80C ( limit Rs. 1,00,000) :

Provident Fund (PF) & Voluntary Provident Fund (VPF):

Public Provident Fund (PPF):

Life Insurance Premiums

Equity Linked Savings Scheme (ELSS):

Home Loan Principal Repayment

National Savings Certificate (NSC):

Pension Funds – Section 80CCC

5-Yr bank fixed deposits (FDs):

Senior Citizen Savings Scheme 2004 (SCSS)

5-Yr post office time deposit (POTD) scheme

Children’s education expense (for which you need receipts), that can be claimed as deductions under Sec 80C.

Newly added long term Infrastructure Bonds u/s 80CCF upto Rs. 20,000

INCOME TAX SLABS AND RATES FOR INDIVIDUALS AY 2015-16

I.In case of individual (other than II and III below) and HUF

S.No	Income Level	Income Tax Rate
i.	Where the total income does not exceed Rs. 2,50,000/-.	NIL
ii..	Where the total income exceeds Rs. 2,50,000/- but does not exceed Rs. 5,00,000/-.	10% of amount by which the total income exceeds Rs. 2,50,000/-.  Less ( in case of Resident Individuals only ) : Tax Credit u/s 87A - 10% of taxable income upto a maximum of Rs. 2000/-.
iii.	Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-.	Rs. 25,000/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-.
iv.	Where the total income exceeds Rs. 10,00,000/-.	Rs. 125,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.

II.Individual resident who is of the age of 60 years or more but below the age of 80 years at any time during the previous year (i.e. born on or after 1st April 1934 but before 1st April 1954)

S.No	Income Level	Income Tax Rate
i.	Where the total income does not exceed Rs. 3,00,000/-.	NIL
ii..	Where the total income exceeds Rs. 3,00,000/- but does not exceed Rs. 5,00,000/-	10% of the amount by which the total income exceeds Rs. 3,00,000/-. Less : Tax Credit u/s 87A - 10% of taxable income upto a maximum of Rs. 2000/-.
iii.	Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-	Rs. 20,000/- + 20% of the amount by which the total income exceeds Rs. 5,00,000/-.
iv.	Where the total income exceeds Rs. 10,00,000/-	Rs. 120,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.

III.Individual resident who is of the age of 80 years or more at any time during the previous year (i.e. born before 1st April 1934)

S.No	Income Level	Income Tax Rate
i.	Where the total income does not exceed Rs. 5,00,000/-.	NIL
ii..	Where the total income exceeds Rs. 5,00,000/- but does not exceed Rs. 10,00,000/-	20% of the amount by which the total income exceeds Rs. 5,00,000/-.
iii.	Where the total income exceeds Rs. 10,00,000/-	Rs. 100,000/- + 30% of the amount by which the total income exceeds Rs. 10,00,000/-.

Surcharge: 10% of the Income Tax, where total taxable income is more than Rs. 1 crore. (Marginal Relief in Surcharge, if applicable)

Education Cess: 3% of the total of Income Tax and Surcharge.